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Why Dollar Tree, Inc. Stock Plunged Today

Steve Symington, The Motley Fool

What happened

Shares of Dollar Tree Inc. (NASDAQ: DLTR) fell 14.3% on Thursday after the retail chain announced disappointing fiscal first-quarter results.

More specifically, Dollar Tree's quarterly revenue climbed 5% year over year to $5.55 billion, which translated to 21.4% growth in adjusted (non-GAAP) earnings to $1.19 per diluted share. Analysts, on average, were expecting higher earnings of $1.23 per share on revenue of $5.57 billion. 

Dollar Tree storefront with green awnings and lettering


So what

CEO Gary Philbin noted that the company was able to achieve revenue and earnings within its guidance ranges provided last quarter, "despite headwinds related to increasing freight costs, colder-than-normal spring weather in many parts of the country and an earlier Easter holiday."

Dollar Tree-brand same-store sales climbed 4% at constant currency, though same-store sales under the Family Dollar banner simultaneously fell 1.1%. Dollar Tree also opened 130 new locations, expanded or relocated 26 locations, and closed five stores during the quarter. 

Now what

Looking forward to the fiscal second quarter, however, Dollar Tree told investors to expect revenue ranging from $5.47 billion to $5.57 billion, with earnings per share of $1.07 to $1.16. The midpoints of both ranges were well below consensus estimates for fiscal Q2 earnings of $1.18 per share on revenue of $5.56 billion.

As a result, Dollar Tree narrowed its full fiscal-year guidance to call for revenue of $22.73 billion to $23.05 billion (compared to $22.70 billion to $23.12 billion previously), and reduced its full-year earnings guidance to a per-share range of $4.80 to $5.10 (down from $5.25 to $5.60 previously).

To be fair, the company elaborated that the new earnings guidance range includes one-time costs related to debt refinancing during the quarter, as well as a smaller expense related to continued pressure from freight and shrink costs.

Still, after combining that outlook with Dollar Tree's disappointing start to the fiscal year, it's hard to blame the marker for bidding the stock down in response today.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.